Scaling v. Growing

If you’ve ever been told you need to scale your business and that thought made you feel ick, this is worth the read. And it’s worth the read even if you haven’t been told to scale…so let’s continue.

What the hell is scaling?

Scaling is not the same as growing.

Neither is necessarily better, but they are different. That’s why it’s important to get clear about what's important before you map out the business model and goals that will be meaningful to you.

What is scaling?

*Scaling* is where your business is able to increase income without also increasing costs. It’s also what’s being referred to in the term “economies of scale” which means when the costs of doing business start to get less as a proportion of your income as you scale.

Scaling happens when your income isn’t capped by your resources (such as product availability, human resources, space, time, etc) and the costs don’t increase when income does.

One example of scalable income is online courses and downloadables. Whether you earn $1K or $100K, your costs and time investment are roughly the same, and the number of spots available isn’t capped.

One of the attractive traits of a tech business is that they are (theoretically) very scalable. Once the tech is perfected and distributable, income is very scalable. The reality is often very different though. There are huge costs to create a tech business and it takes time before the costs don’t increase with the income., i.e. before the business is scalable.

Another example of scaling is when you have a product business and your fixed costs (rent and operating costs) won’t increase as your income grows (up to a point). The only additional costs of the business will be the product costs, and minimal additional operating costs to double/triple/10x business income.

And growth is…

Growth is when your business income increases.

In most businesses, this also means that your business expenses will increase.

The financial goal in business is to ensure your costs don’t increase more than your income. You might be surprised at how often this happens. Founders are excited about the growth they're seeing (woohoo!) and get a little loose with the purse strings. This overspending on expenses while in the growth phase is a huge cause of business failure.

But you can grow. And it’s important that you know how to do so in a way that is manageable and sustainable for you.

Be wary of anyone suggesting you can scale your business with passive income. Passive income doesn’t exist, you always have to work for it, and scalable income takes strategy and clarity.